Section 1
The two numbers
Small independent trades businesses generally change hands on a multiple of earnings. For a shop under roughly a million dollars in owner earnings, buyers typically talk in terms of a multiple of SDE (seller's discretionary earnings, which is your profit plus the owner's salary and perks added back). For larger businesses with real management depth, the conversation shifts to a multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization). The multiples commonly cited for independent home-services shops sit in the low-to-mid single digits, and they move with size, recurring revenue, technician retention, and how dependent the business is on you personally. Treat any specific multiple you read online as a national talking point, not a quote: real ranges vary widely by metro, trade, and the quality of your books. A private-equity platform is valued differently. Large, professionalized, multi-location home-services platforms trade at meaningfully higher multiples than the individual shops they buy, because size, recurring revenue, and management depth all command a premium at the platform level. So when a platform buys your shop at a single-digit multiple and folds it into a business valued at a much higher one, the same earnings are suddenly worth more purely because of whose balance sheet they sit on. That gap, the difference between the multiple they pay and the multiple they mark you to, is called multiple arbitrage. It is the mechanism. The platform does not need to make your shop run better to profit. It profits the moment your earnings move onto a balance sheet the market values more highly. The operational improvements come later, if at all. The arbitrage is booked on close.
Section 2
Why they want you specifically
The reason the money is flowing is not sentiment about the trades. It is math plus demographics. Private-equity add-on activity in HVAC rose 88 percent year over year through mid-2025, and financial buyers now account for roughly half of HVAC service transactions (S&P Global Market Intelligence, 2025). At the same time, baby boomers own roughly 41 percent of privately held small businesses, about 12 million firms, and 10,000 Americans turn 65 every day (Sunbelt and Headway succession data, 2024 to 2025). Trades are among the highest-concentration sectors. A generation of owners with no successor and a wave of capital that profits by consolidating them is not a coincidence. It is a market, and you are the inventory. That is not a reason to feel exploited. It is a reason to negotiate informed. The buyer's model depends on paying you the standalone number while capturing the platform number. The more you understand which parts of your business drive each, the more of that gap you can argue into your own price.
Section 3
What actually moves your number up
You cannot make yourself worth the platform multiple as a standalone seller. You can move your standalone number toward the top of its range, which is often a large swing in real dollars. The levers that matter most are the ones that make your earnings look durable and transferable rather than dependent on you: clean books that survive a buyer's quality-of-earnings review, recurring revenue from service agreements, a technician bench that stays after you leave, and low customer concentration so no single account can walk. Each of those is a reason the buyer can pay closer to the top of the range without more risk. The full worked calculation, including which add-backs a buyer will and will not accept, is a separate exercise. The point here is to see the two numbers clearly before you ever pick up the phone.
Section 4
The fitness test
You are ready to think about your value to a PE buyer if you can separate the two numbers in your head: the standalone multiple they will pay you as one independent shop, and the higher platform multiple they mark you to on close. If you can name the levers that move your standalone number, clean books, recurring revenue, a durable crew, low customer concentration, then you are negotiating from your own frame, and you can push for the top of your range instead of accepting the buyer's first anchor. You are not ready, and should not take a call cold, if you think the buyer's offer is simply "what your business is worth," full stop. That framing hands them the arbitrage for free. The number they offer is the floor of a negotiation whose ceiling they can see and you cannot, until you learn to read both numbers. Learn them before you answer the phone, or hire someone who already has, because the buyer walks in knowing exactly what you are worth to them, and the only way to hold your ground is to know it too.